Investing in Somalia - Business Risk
African Security, Business & Governance

Risky Business: Assessing the Success of Investments in Somalia

Author(s): Eric Keels
Date: August 1, 2019
Publication Type: Research Report
Research Topics: African Security, Business & Governance

Overview:

Drawing on data from One Earth Future’s Shuraako program, this report assesses the relationship between direct funding, proximity to violence, and proximity to international funding on the income of businesses in Somalia. 

Key Findings:

  1. There is a strong and direct relationship between an act of violence and reported loss of income in nearby businesses, with businesses showing a 2.2%-41% decline in revenue during the month an attack happens.
  2. Proximity to large-scale international development aid does not have a detectable effect on businesses in the sample.
  3. The strongest predictor of firm revenue, when controlling for business characteristics, is access to capital as measured by loan size provided. Firms which received more loan income show significantly more revenue.

Policy Recommendations Include:

  1. Underscoring the need for international development practitioners to provide access to capital for firms - even in fragile or conflict-affected states.
  2. The impact of armed conflict is felt quickly and severely, and any reduction at all in the number of attacks or their centrality to concentrated businesses will be an economic benefit.

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